By Muhammad Soban

ISLAMABAD, July 18, 2022: With the evolution of technologies, financial services are also changing their shape. The State Bank of Pakistan (SBP) is helping Pakistan’s financial system to adopt modern technologies. The central bank’s initiative of issuing licenses to the Electronic Money Institutions (EMIs) is one more step towards making Pakistan a cashless society and digitalizing the economy.

The outbreak of Covid-19 and the resulting lockdowns in March 2020 have shaken up most parts of the economy. In order to minimize the financial impact of the pandemic on the economy, it was important for the central bank to ensure the availability of uninterrupted financial services, including transaction settlements.

Owing to its role as an industry regulator and promoter of payments and digital financial services (DFS), the SBP has played a pivotal role in this scenario. By introducing Regulations for Electronic Money Institutions in 2019, the SBP has strengthened the regulatory landscape for payment service providers by fostering innovation through technology and creating an enabling regulatory environment.

The central bank has received a tremendous response since then, as these regulations have provided an opportunity for many fintechs to do business in Pakistan. The bank has processed 11 applications for EMI licenses, of which four — including NayaPay, Finnja, Sadapay, and Paymax – are operating now.

Seven EMIs are in the process of approvals and will soon start their commercial operations in the next few months. Three other EMI licensees are expected to begin their pilot operations soon. Pakistan's EMI license has drawn the interest of many international and local fintech companies. The integration of these high-tech service providers into the country's financial landscape would facilitate pioneering payment solutions and further promote the ongoing digitization of the economy.

In addition to facilitating the EMIs, the SBP has also enabled Payment System Operators (PSOs) and Payment Service Providers (PSPs) to offer white label ATM services, payment initiation and account aggregation services, and e-payment gateway services to promote innovative payment products and services in the country.

Pleading anonymity, an official of SBP told WealthPK that the central bank was working to encourage the financial sector to use modern technology for providing financial services. He said Pakistan’s electronic banking transactions were recorded as above $500 billion in 2020-21 showing that the economy was adopting the latest transaction tools.

Talking about the role of the EMIs in digitalizing economy, the SBP official said they have no physical branch and do not deal with the cash. These EMIs will help Pakistan to move to a cashless society, he added.

The State Bank of Pakistan is providing the necessary support to the federal and provincial governments to digitize their payments and receipts to align with the industry’s standards. There is a particular focus on digitizing tax and levy collections, tax refunds to businesses, and payment of salaries, pensions, and social security benefits to government employees.

Credits: INP-WealthPk